Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter D, Problem D.4EX
To determine
Stock investments: Stock investments are equity securities which claim ownership in the investee company and pay a dividend revenue to the investor company.
Cost method: Cost method is the accounting method used for accounting stock or equity investments which claim less than 20% of the outstanding stock of the investee company.
Debit and credit rules:
- Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in
stockholders’ equity accounts. - Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.
To journalize: The stock investment transactions under the cost method
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Stock Investment Transactions
On September 12, 2,400 shares of Aspen Company are acquired at a price of $58.00 per share plus a $120 brokerage commission. On October 15, a $1.10-per-share dividend was received on the Aspen Company stock. On November 10, 960.00 shares of the Aspen Company stock were sold for $53 per share less a $48 brokerage commission.
When required, round final answers to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank.
Prepare the journal entries for the original purchase, the dividend, and the sale under the cost method.
Stock Investment Transactions
On September 12, 3,300 shares of Aspen Company are acquired at a price of $65.00 per share plus a $165 brokerage commission. On October 15, a $1.10-per-share dividend was received on the Aspen Company stock. On November 10, 1,320.00 shares of the Aspen Company stock were sold for $59 per share less a $66 brokerage commission.
When required, round final answers to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank.
Prepare the journal entries for the original purchase, the dividend, and the sale under the cost method.
Sept. 12
Oct. 15
Nov. 10
Stock Investment TransactionsOn September 12, 2,700 shares of Aspen Company are acquired at a price of $54.00 per share plus a $135 brokerage commission. On October 15, a $0.90-per-share dividend was received on the Aspen Company stock. On November 10, 1,080.00 shares of the Aspen Company stock were sold for $47 per share less a $54 brokerage commission.When required, round final answers to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank.Prepare the journal entries for the original purchase, the dividend, and the sale under the cost method.Sept. 12
Oct. 15
Nov. 10
Chapter D Solutions
Corporate Financial Accounting
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